SUNDAYS RIVER VALLEY MUNICIPALITY

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SUNDAYS RIVER VALLEY MUNICIPALITY

BUDGET 2010/2011 AND MTREF

municipality has been placed under partial administration by the MEC of Local Government and Traditional Affairs in accordance with section 139(1) (b) of the Constitution. A conservative approach was taken for both income and expenditure budgets to try and assist in the stabilization of the organization.

The operating revenue budget of SRVM amounts to R74 569 762 for 2010/2011 financial year.

This represents an increase of R6 919 300 (10.23%). The increase is mainly a result of:

 increased tariffs

 restructuring of tariffs

 Consideration of revenue enhancement programmes

 Phase‐in rebates for agriculture lapsed at end of 2009/10

Although SRVM has determined that it will increase tariffs in general by 6% the municipality reviewed all tariffs to ensure that they are cost‐reflective. Electricity was increased in general by 22 %.

A review of the tariffs indicated that a majority were not cost‐reflective and were thus adjusted.

The water and electricity tariffs were some of the tariffs that saw major adjustments in this regard.

Water step tariffs were adjusted to ensure that it protects basic levels of service and to encourage efficient and sustainable consumption and penalizing for excessive usage of water.

Electricity fees per kWh were also adjusted to reflect cost and relevant mark‐up. An investigation revealed that the selling price of kWh was lower than the cost of acquiring kWh from Eskom.

Community Services were tasked with compiling a revenue enhancement strategy for the department as it was believed that the municipality was not tapping in on all possible revenue that this department could generate. One of the results of this exercise is reflected in the increase in income from fines.

Farmers were allowed an additional phase‐in of 25% during the 2009/10 financial year. The phase‐in approach will no longer be allowed for existing farmers.

Please refer to budget assumptions for more detail. (Chapter 9)

Sundays River Valley Municipality’s budgeted expenditure for the 2010/2011 MTREF amounts to R74 132 450. This represents an increase of R8 075 663 (12.22%)

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This increase is mainly a result of increase in:

 Salaries

 Increase in bulk purchases

 Increase in debt impairment

 General price increases

The anticipated salary increase is in accordance with SALGA Salary and Wage Collective agreement 2009/10 to 2011/12. This indicated a wage increase linked to average CPI index for the period 1 February 2009 until 31 January 2010 plus 1.5 percent. According to Stats SA the historical CPI for this period is set at 6.2 percent year‐on‐year as at end January 2010.

Historical CPI (January 2010) 6.2%

SALGA addition 1.5%

National Treasury benchmark 7.7%

Bulk purchases increased by R1 280 188 (19.81%) which is a result of the increase in bulk electricity which amounted to 28.9%.

Debt impairment was increased by R1 000 000 (20%) from R5 000 000 to R6 000 000. This increase is not adequate as the debt impairment should be closer to R16 000 000. Savings in the

expenditure budget could not be found and expenditure will therefore be curtailed to available cash reserves.

Please also refer to chart A1, A2 (a), A5, A6, A7, A7 (a)

Capital budget (Schedule A5 & A9)

The capital budget of the municipality amounts to R14 457 700. This indicates a decrease of R9 762 150 which is mainly a result of:

 Paterson Bulk Water (DWAF) not received by municipality directly

 Decrease in capital acquisition due to financial constraints

The funds for Paterson Bulk Water project, received from DWAF, will no longer be paid to the municipality directly. DWAF has appointed an implementing agent to assist with the project and funds will be allocated to this implementing agent. Funds received from DWAF in 2009/10 amounts to R10 000 000.

The main projects that are funded in the capital budget are:

 Waterborne Sewerage Moses Mabida phase 2 – R3 507 200

 Waterborne Sewerage Emsengeni phase 2 – R4 625 704

 Upgrading of water supply Enon/Bersheba – R3 278 000

 Upgrading of Waste water treatment works Enon/Bersheba phase 1 – R1 917 446

 Sewerage pump station Bersheba – R725 000

These projects are funded by the Municipal Infrastructure Grant.

Please also refer to chart A9, A10 & A13

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Budgeted Financial position (Schedule A6)

Current assets are assets that can be converted in cash within 12 months and mainly consist of cash in the bank, investments and debtors.

The proposed statement of financial position for 2010/2011 reflects a write‐off of bad debts to the value of R49 410 338. It is believed that these debts are irrecoverable as they are outstanding for more than 150 days.

Non‐current Assets are assets that has a lifespan of longer than 12 months and mainly consist of fixed assets e.g. infrastructure and moveable assets.

It is anticipated that depreciation of assets will amount to R3 600 000 for 2010/11 (2009/2010:

R3 600 000), whilst assets will increase with acquisitions to the value of R14 457 700 (see capital budget schedule A5). This will result in a net increase of assets of R10 857 700 from 2009/2010.

The municipality is not anticipating raising any new loans.

Current provisions consist of provisions for leave pay and bonuses and will increase from R5 625 015 in 2009/2010 to R6 685 560 in 2010/2011.

Non‐current provisions consist of provision for rehabilitation of landfill sites and will remain at R3 400 000 for 2010/2011.

Sundays River Valley will trade at a “net surplus, after appropriations, of R3 437 311. This will result in the accumulated deficit decreasing from R21 306 924 (2009/2010) to R17 869 612 (2010/2011).

Asset management (table A9)

Capital expenditure is anticipated to decrease from R23 860 300 (2009/2010) to R14 405 650 (2010/2011). This indicates a decrease of 40%. The decrease in capital acquisition is due to the

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R10 000 000 of Department of Water Affairs that was allocated to the municipality in 2009/2010.

No funds will be allocated to the municipality during 2010/2011. Department of Water Affairs has appointed an implementing agent (Amatola Water) to assist with the project.

A total of 22.67% (R3 278 000) of the capital budget will be utilized for water infrastructure and 74.53% (R10 775 000) will be utilized for sanitation infrastructure.

An amount of R3 823 678 has been allocated to repairs and maintenance. Repairs and maintenance will be spent according to the following categories of assets:

 Infrastructure – Road & transport ‐ R1 138 653

 Infrastructure – Electricity ‐ R604 303

 Infrastructure – Water ‐ R347 699

 Infrastructure – Sanitation ‐ R321 173

 Infrastructure – Other ‐ R192 585

 Community & other assets ‐ R757 346

 Other assets ‐ R461 918

Repairs & maintenance as a percentage of property plant and equipment is only 3.4%. An ideal percentage would be 9.8%. This would mean that the ratio of repairs & maintenance to operating expenditure needs to increase from the current 5% to 15%. This can only be addressed with increase in revenue collection and enforcing tighter credit control procedures.

CHAPTER 5

OVERVIEW OF THE ANNUAL BUDGET PROCESS

The entire budget process is prescribed by the Municipal Finance Management Act.

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Section 21(1) (b) of the MFMA requires the mayor to table not later than 10 months before the start of the budget year a time schedule outlining the key deadlines and processes for the preparation, tabling and approval of the Annual Budget, the review of the IDP and budget related policies and any consultation process which would be part of the process.

The time schedule was tabled in Council meeting on 10 September 2009 .

The consultation process involves presenting and eliciting comments from the public by Ward and by placing an advert in the local press requesting budget input.

The following stakeholders are identified:

1 community

2 senior management

3 the work force

4 trade unions

5 rate payers association

6 general public and interested parties

Prescribed forms have been developed for both operating and capital inputs.

A presentation is delivered to the communities and responses are recorded. These are considered within the budget realm and capacity. Meetings are arranged by ward and the related Councilor

manages the process.

A Draft Budget is prepared, based on budget assumption, and presented to Council as a pre‐draft budget so as to give an outlook for the year in question. At this stage the budget still needs to be gauged against realistic income and expenditure which translated to budget performance.

Thereafter the eagerly awaited Division of Revenue is received during February and published the grant and subsidy allocation in terms of which budget parameters are set or adjusted. Information from other sources, District Councils and Provincial Authorities are confirmed. Any surplus capacity

is consumed.

During this time the IDP process has started with steering committee meetings as well as public consultation to primary confirm and re‐affirm priorities as well as to disclose any new development.

Critical to this process is capital project funding in terms of MIG. The IDP and Budget, as policy documents are reflected against each for purpose of IDP preparation and budget finalization.

The pre final budget is now table to Council and that council authorizes that the budget is made public for comment. Once this period closes the comments received are once again considered and adjustments are brought about. The draft budget was tabled to Council on 31 March 2010.

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The budget is now tabled during May as a final budget for implementation.

Political oversight of the process

The schedule of key deadlines was submitted to management meeting to monitor the progress of the process by officials against the schedule tabled by the Mayor. The Mayor was regularly informed on the progress.

Consultations & advertisements

Advertisements have been placed in the local newspapers circulating in the area of jurisdiction and district informing the community of the budget, indicating where they can view a copy and how to

lodge comments.

A formal process for consultation was conducted after the draft budget & IDP has been approved by

Council.

This has been done by the following methods:

 The budget was made public by making them available at SRVM's offices.

 Notices were published in two newspapers in the area inviting members of the public to submit representations on the budget.

Any submissions received were considered and if necessary it was incorporated in the budget being presented for consideration.

Community hearings were conducted at all areas –

 Bergsig

 Aquapark

 Moses Mabida

 Paterson

 Valencia

 Nomathamsanqa

 Kirkwood – Ratepayers Association

 Bersheba

Please also refer to IDP document for details of community participation.

Schedule of key deadlines

The following schedule of key deadlines were approved by Council:

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Stakeholders

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The following stakeholders to be consulted include, but are not limited to:

 National Treasury

 Provincial Treasury

 Provincial sector departments

 District municipality

 Providers of bulk resources for water & electricity

 Community

CHAPTER 6

ALIGNMENT OF ANNUAL BUDGET WITH INTEGRATED DEVELOPMENT PLAN

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AMENDMENT AND ADJUSTMENT TO THE 2009/2010 IDP

The review process focussed on:

 Improving the strategic nature of the document, thereby ensuring effective use of available data, careful consideration of available resources, as well as exploring locally appropriate solutions to complex development issues.

 Increasing the usefulness of the document during implementation and monitoring.

The process was influenced by:

 Project progress information as provided by Heads of Departments

 An extensive data search to update the analysis chapter.

 Inputs from community based planning initiatives

The Reviewed IDP document 2009/2010 reflects the following adjustments:

1) Information and analysis were updated to include the following data sources:

NAME OF DOCUMENT¹ SOURCE DATE

Service backlog study Cacadu District Municipality September 2005 Spatial Development Framework Sundays River Valley Municipality November

2007 Integrating the natural environment

into land use decisions of municipal level

The Step handbook

Draft Tourism Sector Plan October 2009

Finance Policies Sundays River Valley Municipality 25 March 2010

Comprehensive Infrastructure Plan DPLG 2008

2) Data is represented by a ward, wherever possible, to assist with decision making such as prioritization, and to ensure an improved

target group orientation.

3) Community Based Plans

4) Reformulation of Foreword by the Mayor

5) Updating of priorities, programmes, projects and strategic objectives emanating from CBP and public participation processes

6) The list of policies is replaced with an explanatory note that says “all Council adopted policies can be accessible from our website’’

7) Reference to implementation plan for institutional risk assessment

8) Performance management system has been updated and new information inserted.

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9) The entire budget section is updated and a revised budget summary for the next three years is

inserted.

10) The five year financial plan is reviewed.

11) Reference to National Medium Term Strategic Framework (MTSF)

12) Reflections and Contextualization of the State of the Province Address – February 2010 13) Development of Mission and Values

14) Inclusion of SDBIP, Turnaround Strategy for SRVM.

15) Comprehensive analysis of Roles and Responsibilities in the IDP Process

The alignment of the IDP with the budget is illustrated in schedules SA4, SA5, SA6. The schedules are attached.

The breakdown of the percentages of funds allocated to each activity is as follows:

o Finance 30.49%

o Service Delivery 8.54%

o Local Economic Development 1.88%

o Governance 38.10%

o Institutional Building 4.33%

o Community Services 16.66%

These allocations are to link up with the Service Delivery and Budget Implementation plan.

A draft Service Delivery and Budget Implementation Plan has been developed and will be tabled with the budget to Council. The final SDBIP needs to be approved within 28 days after the adoption of the budget. KPA’s and KPI’s have been developed and strategic alignment between IDP, Budget and SDBIP is ascertain.

CHAPTER 7

MEASURABLE PERFORMANCE OBJECTIVES AND INDICATORS

Please refer to the draft SDBIP for details of measurable performance objectives and indicators.

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CHAPTER 8

BUDGET RELATED POLICIES

The prioritization of service delivery and the management of council functions is the key to the budget. Sundays River Valley municipality’s budget process is guided and governed by legislation regulations and budget related policies.

Sundays River Valley Municipality embarked on a process of reviewing all financial and budget related policies. The process is aimed at completion during the 2010/2011 financial year.

These policies will be enacted into by‐laws thereby enabling council to undertake its revenue collection

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effort to court and further securing income generation.

Tariff Policy

The Municipal Systems Act requires a municipality to have a tariff policy. One of the challenges in setting tariffs is ensuring affordable tariffs whilst maintaining financial stability.

The tariff policy tries to address this issue and creates a foundation for the principles that address social, economic and financial imperatives that the process of tariff setting should take into account.

This policy was reviewed and approved during the 2009/2010 financial year.

Rates policy

Sundays River Valley has adopted a rates policy which is line with legislative requirements. The policy became effective 01 July 2009.

The policy provides that properties be rated based on their market value. A new valuation roll is in

place.

Indigent Policy

This policy was reviewed and approved during the 2009/2010 financial year.

Sundays River Valley municipality is committed to ensure that all households have access to its services. Due to the fact that Sundays River Valley Municipality has a high level of unemployment and seasonal workers, the municipality decided to adopt an indigent policy. This policy will ensure that poor households have at least access to basic services.

Supply Chain Management Policy

Municipalities are required in terms of section 111 of MFMA to have a supply chain management policy. Sundays River Valley Municipality has a policy within the framework of the legislation. The policy adheres to the following principles:

 Procurement system which is fair, equitable, transparent, competitive and cost effective in terms of section 217 of the Constitution

 Best practice within supply chain management

 Uniformity in supply chain management systems between organs of state in all spheres

Credit control and debt management policy

The credit control and debt management policy of Sundays River Valley Municipality was reviewed during 2009/2010. This policy provides the procedures and mechanisms for credit control and collection of debts. The primary objective is to ensure that all monies due to the municipality is collected efficiently and promptly.

Policies to be developed and or reviewed during 2010/2011

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Banking and Investment policy

Budget management policy Funding and reserve policy Borrowing policy

Asset management policy

CHAPTER 9

BUDGET ASSUMPTIONS

The following list provides an outlook of the budget assumptions used in the compilation of the budget.

Income

1. That the Budget will be funded from realistic income sources

This includes:

 the income generated from patrons of basic services as well as other service rendered

 the income received from grants, subsidies and donated from all spheres of

government and public.

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2. Income is calculated during the budget process on the principle that current income generated

will proportional and indicative of what income will be realized after considering abnormal

events.

These events includes the implementation of new General Valuations or new housing

developments.

3. Income is recognized and adjusted according to the above principle and consideration is given to current and prior year collect and payment levels.

4. Income collected from prior years is not consider as a budget funding source as current years

Tariffs are intended to fund the budget.

5. Income utilized from the Equitable Share to subsidized basic services is so recorded and turned

over to fund expenditure

Expenditure

1. The principle of realistic income mirrors the objective of realistic expenditure against the

Background of what is our mandated.

2. Driving expenditure is considered real and thus divided into spending categories:

2.1 the upkeep of basic, existing services

2.2 mandatory and contractual obligations

3. Expenditure is adjusted and dependant on the achievement of realistic income and availability

of cash resources

4. Expenditure is divided in two main classes, namely:

4.1 Capital

This expenditure budget is mainly funded by grant income and own income

4.2 Operating

This budget includes the day‐to‐day running expenses of the municipality.

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5. Budget growth is guided by National Treasury guidelines e.g. CPIX predictions as well as

actual expenses to be incurred.

6. Prior year and current year performance plus the need to improve or reduce expenditure is considered when setting the rand amount with no compromise to point 2.1.

7. Cost cutting measures in terms of the financial turnaround plan of the municipality.

8. The municipality was placed under administration in accordance with section 139(1)(b) of the

Constitution. A strategic workshop was conducted of which the outcome was a strategic turnaround plan for the municipality. The objectives of the turnaround plan was taken into

consideration with the drafting of the budget.

Tariff

1. Tariff increases is guided by national Treasury CPIX predictions as well as affordability.

2. Tariff supports income generation and is usually set for the financial year

3. A tariff is a derivative of:

Basic expenditure

divided by

No of patrons

plus

subsidization

4. All tariffs are set taking into consideration the cost to provide the service and national trends and regulations.

Municipalities were advised by National Treasury (Circular 51) that they should revise their rates, tariffs and other charges for their 2010/11 budgets and MTREF taking into account the labour (i.e. the wage agreements with unions) and other input costs of services provided by the

municipality, the need to ensure financial sustainability, local economic conditions, the affordability of services and their indigent policy.

4.1 The following tariffs indicate significant increase due to a review of the tariff structure

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and/or review of cost of providing the service:

 Electricity

 Water tariff

 Cemetery fees

4.2 Electricity tariff

Electricity was increased by 22 %. This was necessary due to the financial difficulties that

the municipality is experiencing. The price per Kwh was also adjusted to reflect cost and relevant mark‐up. An investigation revealed that the municipality was selling kwh

at a cost lower than that acquired from Eskom. Consumers using between 301 kwh and 700 kwh will experience a price increase of 44% due to the correction of this

problem.

KVA consumption increased with an average of 54% as this was one area where the municipality were not recovering cost at all, but selling at a loss.

4.3 Water tariff

National Treasury encouraged municipalities to review the level and structure of their

water tariffs carefully, with a view to ensuring:

 Water tariffs are fully cost‐reflective – including the cost of maintenance and renewal of purification plants and water networks, and the cost of new infrastructure;

 Water tariffs are structured to protect basic levels of service; and

 Water tariffs are designed to encourage efficient and sustainable consumption (e.g.

through increasing block tariffs).

Sundays River Valley municipality’s water tariff was not in line with this requirement and

therefore was adjusted to encourage efficient and sustainable consumption.

Consumers using excessive water will therefore be penalized .

Consumption of 41kl – 55kl will thus see an increase of 30% in tariff.

Water availability charges increased by 7%. Prepaid water tariffs increased by 28%

to bring it in line with other water tariffs (on account).

Water deposits were increased by 26% due to the increased risk of non‐payment.

The

deposit will be sufficient to cover an average monthly consumption of a household.

4.4 Cemetery fees

Cemetery fees will increase by 50% for digging of grave. The fee was not cost reflective and needed to increase to ensure full recover of cost.

4.5 Rental of municipal buildings

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Rental of swimming pool increased by 34% to R400 and the deposit payable increased

by 61% to R350

Hall deposits increased by 15% to R250 and rental of community halls increased to R150 (between 10h00 – 17h00) and R300 (17h00 – 24h00)

4.6 Rates

Rates increased by 14% for residential and agriculture, 10% for businesses and 8%

for

state owned properties.

4.7 All other tariffs

All other tariffs were increased by an average of 7%.

Please refer to tariff list, Annexure A, for further details

Adjustment

1. The budget is adjusted according to performance of both income and expenditure.

2 Inter‐budget adjustment also takes place where provisions made proved insufficient and counted by over‐provisions or objective change.

External Factors

The Minister of Finance suggested a headline CPI inflation rate of 5.7% (2010/11), 6.2%(2011/12) and 5.9% (2012/13).

These inflation rate expectations have been used for the compilation of this budget

BULK PURCHASES

The municipality budgeted for an increase of 28.9% in bulk electricity purchases ‐ as guided by

NERSA

EMPLOYEE COST

The budget is based on a salary increase of 7.7%.

The salary budget for 2010/11 amounts to R25 432 266. This represents a 12.05% increase in employee cost over the previous financial year. This is due to the provision of new posts that will be activated in the Finance Department during 2010/2011 in accordance with the financial turnaround plan of the

Municipality.

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FREE BASIC SERVICES

SRVM's indigent policy currently makes provision for the subsidization of 50 KWH of electricity (pre‐

paid customers only) and 6 KL of water (for all) per month. The subsidies are funded from the equitable share allocation. The municipality made provision in the budget for the following:

 Electricity ‐ R891 262

 Water‐ R2 475 809

PROVISION FOR BAD DEBT

The municipality has provided for a provision of bad debt to the value of R6 million for 2010/11

The total provision for bad debt as at 30 June 2009 (as reflected in AFS) amounted to R44 410 338.

The municipality believes that the R6 million is not adequate and should be closer to R16 million.

However savings could not be found in the expenditure budget to accommodate this increase. It will therefore be imperative for the municipality to improve its collection rate and to limit expenditure to the availability of cash resources.

FINANCIAL SITUATION OF SRVM

The municipality was placed under financial administration by the MEC of Local Government during February 2010. In order to address the financial situation of the municipality a financial turnaround plan was approved by Council on 25 March 2010. Please refer to the IDP document for a copy of the

financial turnaround plan.

The budget was drafted on a cost reduction basis and taking the recovery plan in consideration. The potential of e.g. Traffic department to generate income for the municipality was investigated and the Director Community Services was asked to prepare a revenue enhancement programme for her department. This potential is reflected within the budget.

CHAPTER 10

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BUDGET FUNDING

The following is a broad overview of the financial outlook of the municipality in the current year and

compared to the coming year.

The capital budget represented 27 % of the total budget in 2009/2010 and has decreased to 16% of budget in 2010/2011. R14 053 350 (97%) of the capital budget for 2010/2011 will be funded by government grants. (2009/2010: 93%)

2009/2010

capital 24,220,300 operating 66,056,788

Figure1

2010/2011

capital 14,457,700.00

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operating 74,132,450.66

Figure 2

Figure 3

2010/2011

own income 42,116,762

grant & other 46,506,000

As indicated in the pie, own income account for 48% of total income whilst grant income accounts for 52% of income.

A major source of income still remains the equitable share allocation from National Treasury

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Own income increase is funded from:

1 Tariff increase

2 New billing area from formal and high density residential development

3 New property valuations

Graph 4 illustrates the expenditure to be committed in spending types.

2009/2010 2010/2011

salaries & wages 22,697,335.60 25,432,266.50 general expenses 27,178,346.05 31,239,402.64

repairs &

maintenance 3,759,563.94 3,823,678.97

FINANCIAL CHALLENGES AND CONSTRAINTS

SRVM faces the following financial challenges:

1) Achieving financial stability in the medium term and long term

2) Increasing the debt collection %

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3) Dependence on grant funding

4) Acceptable level of tariff increases – trying to balance financial sustainability and affordability

5) Managing cost

6) Exploring alternative revenue sources 7) Identifying cost savings

In order to address the first challenge, SRVM has approached National Treasury to assist the municipality with a financial recovery plan. The municipality was subsequently placed under financial administration during February 2010 after which an administrator was appointed by the MEC of Local Government. A strategic turnaround plan was developed for the municipality to address key areas that need intervention.

The municipality has also adopted a new debt management and credit control policy to give effect to more efficient credit control. The municipality is in the process of capacitating the credit control unit with more staff to ensure the functions are performed adequately. The current collection rate of Sundays River Valley municipality is approximately 40%.

FINANCIAL RISKS

Financial risks include:

 Changes in inflation rate and other variables

 Unemployment trends

 Global financial instability

FORECAST FOR FUTURE FINANCING AND PERFORMANCE

The key to a future prediction is stability in two realms, firstly, management and Council and secondly,

the service environment. Needs are ever increasing and funding is a challenge.

Trying to kickstart development has to be in the way we interact with communities during the IDP and

Budget process. External stakeholders such as provincial departments needs to subscribe to the same developmental ideas as found in local government. We still find sector departments not being

financial capable of adequately supporting development. This limits large developments as the municipality is not financial viable enough to service large loans.

The municipality does not anticipate raising any new long term loans. The municipality currently utilizes a bank overdraft of R1 million. The overdraft is reviewed annually.

STATEMENT OF INVESTMENT AND MEDIUM‐TERM STRATEGY

Being a small municipality and not having surplus resources, the action of preserving the future value

of money is found in a banking practices whereby funds are automatically transferred to a call account

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bearing a favorable interest rate.

All funds received as "trust funds" are deposited in individual banks accounts for independent

transactions.

The success to the indicative future is to ensure that the current year not only uphold current trends

and commitments but also act as a precursor to the future. Importantly it is recorded in the IDP for the successive years. Planning capital and service infrastructure to contemplate future services needs ahead of e.g. housing developments are important. This is also towards a commitment for achieving the 2011/12 and 2012/13 objectives.

Consequential to infrastructure development is accommodating the operating budget, which we have.

This includes the amendment of the organogram for labor resource needs.

Future development is a denominator of revenue which in turn depend on tariff increase. Due to the poor nature of our inhabitants it is difficult to drive income with tariff as approximately 65% of the consumers are indigent.

GRANTS TO BE RECEIVED

Please refer to schedule SA18 for all grants that will be received by Sundays River Valley Municipality.

INFORMATION ON PROPERTY RATES

Please refer to schedule SA11 for summary of property rates information.

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CHAPTER 11

EXPENDITURE ON ALLOCATIONS AND GRANT FUNDING

Please refer to the following schedules

 Schedule SA18 – Transfer and grants receipts

 Schedule SA19 –Expenditure on transfer and grants

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CHAPTER 12

ALLOCATIONS AND GRANTS MADE BY THE MUNICIPALITY

No allocations will be made to any other municipality, any organ of state or any organization or bodies outside any sphere of government as referred to in section67(1) of the Act.

Please refer to schedule SA21.

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CHAPTER 13

COUNCILOR ALLOWANCES AND EMPLOYEE BENEFITS

Please refer to the following schedules

 Schedule SA22 – Summary of councilor and staff benefits

 Schedule SA23 ‐ Salary, allowances and benefits (councilors and snr managers)

 Schedule SA24 – Summary of personnel numbers

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CHAPTER 14

MONTHLY TARGETS

Please refer to schedule SA25 – SA30

 Schedule SA25‐ Budgeted monthly revenue & expenditure by source

 Schedule SA26 – Budgeted monthly revenue & expenditure by vote

 Schedule SA27‐ Budgeted monthly revenue & expenditure by standard classification

 Schedule SA28 – Budgeted monthly capital expenditure by vote

 Schedule SA29 – Budgeted monthly capital expenditure by standard classification

 Schedule SA30 – Budgeted monthly cash flow

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CHAPTER 15

ANNUAL BUDGET AND SDBIP – DEPARTMENTS

Please refer to draft SDBIP attached.

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CHAPTER 16

CAPITAL EXPENDITURE DETAILS

Total capital expenditure for 2010/2011 will amount to R14 458 050. These acquisitions will be funded as follows:

 R14 053 000 – funded by government grant

 R404 700 – funded by own revenue

Please refer to Schedules:

 SA34a – Capital expenditure on new assets per class

 SA34b – Capital expenditure on the renewal of existing assets

 SA34c – Repairs and maintenance schedule by class of asset

 SA36 – Detailed capital budget

 SA37 – projects delayed from previous year

CHAPTER 17

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CONTRACTS HAVING FUTURE BUDGETARY IMPLICATIONS

The municipality does not have any contracts which have future budgetary implications beyond the 3 years budgeted for.

Please refer to Schedule SA33

CHAPTER 18

LEGISLATIVE COMPLIANCE

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The Municipal Finance Management Act brought about uniformity, accountability and control measures to local government in terms of financial reporting and budgeting. The Act required a high level of transformation financial disciplines and planning.

New budget regulations were published in Gazette nr 32141 on 17 April 2009. The object of these regulations is to secure sound and sustainable management of the budgeting and reporting practices of municipalities by establishing uniform norms and standards and other requirements for ensuring transparency, accountability and appropriate lines of responsibility in the budgeting and reporting process. The 2010/2011 budgets of all municipalities needs to comply to these regulations.

Challenges experienced:

The draft budget could not be prepared in the required format, due to organizational and political instability during the first half of the financial year. The municipality operated without a CFO for a period of six months. The municipality was also placed under administration in accordance with Section 139(1)(b) by the MEC of Local Government and traditional Affairs.

The draft budget tabled to Council on 31 March 2010 was thus still in the format as regulated by Circular 28.

The final budget is tabled to Council compliant with the new budgeting regulations.

The MFMA regulates monthly and quarterly reports to be submitted to National Treasury. Although Sundays river Valley Municipality complied with submitting the reports, the reports were, in a number of cases, submitted National Treasury late.

Achievements:

An Administrator was appointed by the MEC to ensure financial turnaround and stability within the organization. An extensive strategic turnaround plan was developed by the Administrator and approved by Council on 25 March 2010.

As a direct result of the turnaround plan the following policies were adopted by Council

 Tariff policy

 Indigent policy

 Credit control and debt collection policy

These policies are all a requirement of the MFMA and the Municipal Systems Act.

The Municipality has adopted GRAP standards and the 2005/06 annual financial statements were prepared in line with GRAP standards. The municipality is however facing challenges with implementation of a number of GRAP standards. To address this problem, a gap analysis will be done and an implementation plan developed.

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CHAPTER 19

BUDGET – DETAILS PER DEPARTMENT

Please refer to schedule SA2 for details

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ANNEXURES

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7 PROPOSED TARIFF STRUCTURE FOR 2010/2011

PROPOSED PROPOSED PROPOSED PROPOSED PROPOSED

TARIFFS TARIFFS TARIFFS TARIFFS TARIFFS

2008/2009 adj 2009/2010 2010/2011 2011/2012 2012/2013

1. WATER

Metered Water (rising block)

0 to 6 kl free (free basic service and Indigent subsidy) 4.19 4.44 4.79 5.08 5.38

7 to 15 kl 5.00 5.30 5.62 5.96 6.31

16 to 25 kl 5.32 5.64 5.98 6.34 6.72

25 to 40 kl 5.37 5.69 6.03 6.40 6.78

41kl and greater 0.00

41 to 55kl 4.52 4.79 6.21 6.58 6.98

56 to 70 kl 3.01 3.19 6.30 6.68 7.08

70 to ….KL 2.41 2.55 6.35 6.73 7.13

Water Sport fields per KL 3.00 ^3.18 3.37

Unmetered Water (standpipe) 26.70 28.30 30.00 31.80 33.71

Water availability Charge Monthly 17.90 18.97 20.30 21.52 22.81

Water availability Charge Anually 214.79 227.68 243.61 258.23 273.73

Prepaid Meters per KL FBS FBS FBS FBS FBS

Prepaid Meter water…

7 to 15 kl 4.15 4.40 5.62 5.96 6.31

16 to 25 kl 4.42 4.69 5.98 6.34 6.72

25 to 40 kl 4.46 4.73 6.03 6.39 6.78

41 kl and greater

41 to 55kl 4.52 4.79 6.21 6.58 6.98

56 to 70 kl 3.01 3.19 6.30 6.68 7.08

70 to ….KL 2.41 2.55 6.35 6.73 7.13

Municipal Water Consumption

0 to 6 kl free (free basic service and Indigent subsidy) 4.19 4.44 4.79 5.08 5.38

7 to 15 kl 5.00 5.30 5.62 5.96 6.31

16 to 25 kl 5.32 5.64 5.98 6.34 6.72

25 to 40 kl 5.37 5.69 6.03 6.40 6.78

41kl and greater 0.00

41 to 55kl 4.52 4.79 6.21 6.58 6.98

56 to 70 kl 3.01 3.19 6.30 6.68 7.08

70 to ….KL 2.41 2.55 6.35 6.73 7.13

Water Credit for maintaining grass on pavements 30.37 32.76 34.73 36.81

M/Mabida Water Availability and 8 KL consumption 45.61 94.00 99.64 105.62

Prepaid Meters basic charge plus kl -4% 0.00 0.00 0.00 0.00 0.00

Minimum purchase for prepaid 10.00 10.00 10.00 10.00 10.60

Optional availability charge on prepaid purchases (%) 0.20 0.20 0.20 0.20 0.21

Water Deposit 300.00 318.00 400.00 400.00 424.00

Default advance payment (three time average consumption)

Reconnection fee 250.00 265.00 408.00 432.48 458.43

Disconnection fee 250.00 265.00 408.00 432.48 458.43

Illegal connection fine 1000.00 1060.00 2000.00 2120.00 2247.20

New connection Contractors fee + 20%) full cost full cost full cost full cost full cost

2. IRRIGATION WATER

Basic Charge - built up erven 337.39 357.63 380.00 402.80 426.97

Basic Charge - not built up erven 1445.73 1532.47 1625.00 1722.50 1825.85

SUNDAYS RIVER VALLEY MUNICIPALITY TARIFF STRUCTURE FOR 2010/2011 FINANCIAL YEAR

SUNDAYS RIVER VALLEY MUNICIPALITY

SUNDAYS RIVER VALLEY MUNICIPALITY

BUDGET 2010/2011 AND MTREF

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